The Role of Hospitals in Community and Economic Development

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May 4, 2017
Kate Samuelson

Across differing regions, medical institutions (often referred to as “anchor institutions”) play a major role in the social and economic vitality of cities. In total, hospitals provide employment for more than 5.7 million Americans, with tens of thousands of new healthcare jobs added each month. Additionally, hospitals spend over $852 billion on goods and services annually and generate greater than $2.8 trillion of economic activity. The Bureau of Labor Statistics predicts that, between 2014 and 2024, the healthcare industry will grow faster and add more jobs than any other sector.

Hospitals are particularly important in high-poverty areas. In each of the largest twenty U.S. cities, a health system is among the top ten private employers; in high-poverty communities, a health system is almost always among the top five. About one in fifteen of the largest hospitals in the U.S. are located in “inner cities,” and these hospitals alone spend more than $130 billion each year. Because not-for-profit hospitals are tax-exempt, surrounding neighborhoods might view them as disconnected from small business and community development. However, the missions and bottom lines of hospitals tie them to their respective communities. More than other industries, the hospital industry has the ability and incentive to leverage resources for community revitalization.

Increasingly, hospital executives are pursuing upstream interventions to minimize downstream costs. There is a major push to make healthcare for low-income individuals less reactive and more proactive; hospitals are striving to reach these patients more frequently at less expensive points in the healthcare system. Community health centers lack the capacity to fully serve the large population without quality health insurance. Private hospitals effectively serve as the “insurers of last resort,” caring for uninsured patients who can’t afford to pay their medical bills. Many are aiming to generate long-term savings through population health and community development strategies.

When not-for-profit hospitals address socioeconomic issues in the communities they serve, they help residents to afford health insurance, reduce costs due to preventable and chronic conditions, and support their own workforce needs. Building community wealth improves the ability of local residents (who are likely patients) to pay for care. Further, attending to the social determinants of health can prevent or significantly reduce the management cost of chronic conditions such as diabetes, which disproportionately affects low-income individuals.

Community building, the highly necessary counterpart to healthcare access work, has been steadily gaining traction within the field of public health. According to the Robert Wood Johnson Foundation, sixty percent of premature deaths are related to environmental conditions, social circumstances, and behavioral patterns; just ten percent are the result of inadequate healthcare access. Moreover, ninety-eight percent of hospital CEOs agree that, at least at some level, hospitals should investigate and implement population health management strategies. Hospitals are increasingly acting on the growing evidence base suggesting that interventions to improve a community’s social and economic health can significantly impact community members’ physical and mental health.

Since around the mid-1990s, hospitals across the U.S. have experimented with innovative approaches to community and economic development. In Rochester, Minnesota, Mayo Clinic invested $7 million to establish First Homes, a community land trust. The trust has created 875 units of high-quality affordable housing and encouraged over $360 million of private investment in downtown Rochester. In Boston, Massachusetts, Partners Healthcare (parent to Massachusetts General Hospital and Brigham & Women’s Hospital) has integrated community health improvement with workforce development, providing job training and a pathway to entry- and mid-level employment (approximately 90% placement rate) for over 400 community members. Since 1990, San Francisco-based Dignity Health (formerly Catholic Healthcare) has provided $133 million in below-market interest rate loans and $47 million in grants to nonprofits improving health and quality of life in its service area. These are just a few examples of the many meaningful ways in which hospitals are supporting their communities, making local capacity building a priority, and creating the foundation for long-term poverty alleviation.

The reconceptualization of healthcare to include social determinants of health is critical to public health and economic development alike. Nonprofit hospitals, private health foundations, government institutions, and other entities must collaborate to address the multi-faceted, social drivers of health disparities.

Fels Institute of Government

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